Money & metrics · also called effective cost per mille, effective CPM
eCPM (effective CPM)
eCPM converts any pricing model into an equivalent price per thousand impressions, so traffic bought or sold in different ways can be compared.
Some traffic is sold per click, some per thousand views, some per conversion. Effective CPM puts them on one scale: total cost (or total revenue) divided by impressions, times 1,000.
Arbitrageurs meet eCPM on both sides. On the buying side it is how traffic sources rank advertisers. A native network or social platform has a limited number of slots and gives them to whichever ad earns it the most per thousand showings. An ad paying a modest CPC with a high CTR can outrank one paying a high CPC that nobody clicks. This is why a good creative lowers click costs.
On the earning side, eCPM (often written RPM when viewed from the publisher's seat) lets an operator compare a search feed with other ways of monetising the same page, such as display banners. Remember that it is an average: it can hide a mix of excellent and worthless placements.
An example
For example, an ad with a $0.20 CPC and a 2% CTR earns the network 20 clicks x $0.20 = $4 per thousand impressions (eCPM $4). A rival ad paying $0.30 with a 1% CTR yields only $3, so the cheaper bid wins the slot.
Related terms
CPM (cost per mille)
CPM is the price of one thousand ad impressions; "mille" is Latin for thousand.
RPM (revenue per mille)
RPM is revenue earned per thousand units, usually page views, sessions or ad impressions: revenue divided by the count, multiplied by 1,000.
CPC (cost per click)
CPC is the price paid for one click on an ad; in search arbitrage it is what the arbitrageur pays a traffic source for each visitor.
CTR (click-through rate)
CTR is the percentage of people who click something after seeing it, calculated as clicks divided by impressions.
Creative
A creative is the actual advertisement a person sees: its image or video, headline, text and button.